And Just In Case There Is No Deal...

It would appear that despite the market's apparently self-fulfilling 'proof' that we will not go over the cliff, that investors are far less exuberant than the indices would suggest. Today credit and interest rates markets are not following along and over the last two days, implied volatility (VIX) has been significantly bid as prudent investors appear comfortable (or stuck) holding their near-record net longs (as long as they are put-protected)... The volatility term-structure has flattened significantly (14 month flats) as short-term put buyers are very active (and not just in HLF).

Stocks remain on their own as credit and volatility is unimpressed...

and in fact there has been significant protection buying...

which has crushed the term-structure of vol to 14 month flats...

So, once again, retail investors are propagandized into buying the rally by a media that sees only what it wants to see (a market rally that 'proves' the cliff won't happen) - while professionals are selling into rallies (AAPL as an example) and hedging aggressively (VIX) what they can't sell (due to illiquidity).

Don't care about all this vol-stuff and term structures? well perhaps this chart will help...